tv Nightly Business Report PBS January 3, 2011 7:00pm-7:30pm EST
>> susie: wall street runs into the new year with a rally and the experts say it may be time to tweak your portfolio. >> most people are still overweighted in bonds. that's the wrong decision to make for the new year. >> tom: getting your portfolio ready for the new year. you're watching "nightly business report" for monday, january 3.
this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening everyone, and happy new year. investors kicked off 2011 with a rally. tom, it looks like they're feeling positive about the outlook for the economy this year, and all the major stock averages rose on that optimism. >> tom: susie, stocks surged
right from the opening bell this morning, but pulled back a bit by the close. still some decent gains. the dow rose 93 points, the nasdaq added 38 and the s&p 500 was up 14. those gains came on a pickup in trading volume. a billion shares moving on the nyse and nearly two billion on the nasdaq. >> susie: so now what? is this the time to make some new investment moves? suzanne pratt reports. >> reporter: it's a new year. it's a new decade. so is it time for a new portfolio? experts say radical changes are unnecessary for most investors. there is room for serious tweaking. tweak number one, market pros say investors should put more money into the stock market in 2011. and decrease their bond holdings. financial planner lew allfast is telling clients two-thirds of their portfolio should be in stocking and only one-third in bonds. it's what he calls a more
normal allocation for more normal times. >> most people are still overweighted in bonds. that's the wrong decision to make for the new year. >> reporter: while stocks are expected to outperform bonds this year, it won't be all stocks in all sectors or sizes. some financial experts suggest investors up their holdings of large cap names, in particular those that pay attractive dividends. prudential financial strategist quincey crosbie says big u.s. companies are best positioned to benefit from an improving global economy. >> we are not suggesting that we just sell out of small and mid cap. we're just taking some profit from there. and we're reallocating it into those big large-cap names. >> reporter: some experts also say investors need to remember to look overseas this year. even though some emerging markets are frothy. many pros say don't overlook emerging stock markets. >> we merging markets is here. it is today.
it is tomorrow. and it's probably the year's after tomorrow. the final portfolio tweak involves cash. investors are once again talking about opportunity rather than fear. for that reason, experts say keep some cash on hand. for new investment ideas in 2011. suzanne pratt, nightly business report, new york. here are the stories in tonight's n.b.r. newswheel: bank of america is writing a big check to uncle sam's mortgage giants. the bank will pay $2.8 billion to fannie mae and freddie mac. fannie and freddie will use the money to buy back home loans issued by countrywide that have gone bad. oil prices rallied along with stocks on prospects of a sustained u.s. recovery in the new year. crude hit a 26-week high, rising above $92 a barrel before falling back a bit to close at $91.55 a barrel in new york trading. is facebook worth $50 billion? that's the price it's being tagged with. goldman sachs and russia's
digital sky technologies invested half a billion dollars in the social networking site last week, putting facebook's total value at $50 billion. still ahead, in tonight's beyond the scoreboard: union negotiations with billions of dollars at risk. how the economy affects talks between the n.f.l. and its players union. >> susie: as we reported, encouraging economic news was the catalyst for today's market rally. american factories are running at the fastest pace in seven months. the manufacturing index of the "institute of supply management" jumped in december. also today, construction spending rose more than expected in november. our guest tonight says the economy is looking better. he's josh feinman, chief global economist of d.b. advisers, deutsche bank's asset management business. his 2011 forecast calls for the u.s. economy to grow 4%. the unemployment rate?
9%, down from 9.8% now. very low inflation: 1% or less, and the federal reserve will continue to keep interest rates near zero. hi, josh, happy new year to you. >> happy new year, susy. >> susie: all right so, 4% growth sounds like a pretty good number. but will people feel like they're really going through a recovery this time? >> well, starting to feel that way. i mean we've been in recovery now for but a year and a half. and until very recently it hasn't really felt like it. the reason is we haven't grown that rapedly and particularly the labor market just hasn't snapped back. i think we're going to start to see some of that in 2011, a stronger profile. to the labor market, and i think we'll get people to start to feel a little bit more like this is a recovery. >> when you say that the labor market is going to improve, your forecast is for unemployment to get to 9% from where it is right now so how many new jobs are we talking about?
how many more people will be hired? >> we're looking for payroll increases to be maybe around two and a half million on net in 2011, so that would translate into a couple hundred thousand a month. certainly stronger than we've seen at any point in this recovery yet. and it will start the process, we think, of bringing down the unemployment rate. but we have a tremendous amount of wood to chop. 9% unemployment rate is not acceptable to anyone. it's better than we are today. but it's not anywhere near where we need it to go. we need to have a number of years of this kind of job growth that we're anticipating for 2011 to continue for us to get unemployment even close to back to where it was before the recession. >> now as you know, we have an employment reports that's coming out this friday. will that number show growth, will it be a good report or a bad one? >> i think so. you know, last months was a clunker. it was like the only bad report that we have weigh seen in the spate of generally stronger data that we've been getting over the last few months.
i think it is an aberration and i think that friday's employment report will look stronger. >> susie: well, given what is going on in the job market what is your sense of consumers these days? we saw at christmas there was a lot of spending t seemed like they were optimistic. are they more confident or still worried? >> i think they are still worried but they are kind of crawling out of that i bunker mentality a little bit. we had probably the strongest christmas than in several years. admittedly that is not a tremendous hurdle to get over but still it is encouraging. and the consumer looks perkier here in the latter part of 2010. i think that contributed generally to the stronger momentum we saw in the economy. i think that's going to carry forward. but i think there's still residual concerns. unemployment is still high. and you know which still have some deleveraging perhaps, households still look tokai little prudent, cautious. so better but i don't think fully healed. >> susie: dow expect to see encouraging signs in housing or home prices so that consumers feel better about
things? >> i think the worst is over in housing. but i don't look for robust recovery. housing is typically been in the vanguard. usually leads the way. i don't think that is likely to happen this time because we still have an overhang from the bubble years. so we'reworking it off but i don't think it's completely worked off yet. >> susie: so josh, what's the key thing that you going to be watching or that we should be watching to know whether the economy is doing better or getting worse. >> i think it's labor market for sure. i mean we need to get confirmation that the labor market is turning the corner and is really generating the kind of job growth that supports incomes, that supports confidence that supports spending and you get into these positive feedback loops where the spending and the jobs kind of work together and the economy, you know s self-sustaining. i think we're going to get there we're not there yet but we're hopeful. >> susie: just a few seconds left what could go wrong what is your big worry. >> you know, i still worry
about some of the longer-term budget problems that the country faces. ultimately they will have to be tackled. i don't know whether we will find the political will. europe has got trouble. i don't think the u.s. will get a lot of help from outside the country this year. >> susie: we'll see how things go. thank you so much for coming on the program tonight. >> thanks for having me, susie. >> susie: we've been speaking with josh feinman of db advisors. >> tom: what will the new year bring for your investments? one factor is the tax rates the companies you invest in pay on their profits. the president and members of the new congress are looking at lowering the corporate tax rate, but as darren gersh reports, tax reform is a challenge. >> reporter: canada greeted the new year with a corporate tax cut, japan too. with much of the rest of the world easing the burden on business. the tax foundation's scott hodge says pressure is growing on congress to deliver lower corporate rates here too. >> i think many people are
beginning to realize that unless we cut our corporate tax rate and fundamentally change the way we tax corporations, we're going to continue to lose ground to other nations. >> reporter: in their meeting with president obama last month corporate c.e.o.s pushed for a special tax break so they could bring their overseas earnings back home. the business leaders argued that would create jobs in the united states. the white house is considering their request. the problem is congress has done this before. a 2004 tax bill allowed companies to bring earnings home at a lower rate at a cost of more than $3 billion. it's an expensive provision says the tax policy center. >> what is the lesson a corporate c.e.o. or cfo learned from that experience. the lesson they learned is let's keep as much money abroad as possible until we can convince the people in congress to give another temporary tax break and we will bring it back at that moment. >> reporter: and if you factor the research and development tax credit and breaks for buying new equipment, maron says the u.s. corporate tax system look morse competitive.
>> because of the various tax breaks we offer actually the effective tax rate for american businesses is not the highest in the world. it's sort of in the middle of the developed countries. but they've been coming down as well. >> reporter: as much as some republicans and democrats may want to tackle corporate tax reform t won't be easy. with way huge budget deficit, the government can't afford to cut corporate tax rates deeply. and raising taxes is a nonstarter with the new republican house. companies that benefit from existing tax breaks are also not very interested in giving them up. which is why economist douglas-- thinks these reform also take a long time. >> the bad news is that we have had an income tax about a hundred years. we've had one tax reform. that suggests it is hard to do and it lasted about two years that is correct suggests it is really hard to do right. so i'm not optimistic about tax reform quickly. >> reporter: still president obama's deficit commission recommended corporate tax reform. and the white house is weighing just how far to push the issue in the upcoming stated of the union address. darren gersh, nightly business report, washington.
tom, stocks took off this morning and two hours into trading the blue chips were up something like 134 points and then they pulled back and i know are you going to explain all of this in your new charts and new look for market focus. >> tom: we have a new look and a new year and some new highs as well for these major indices, susie, so let's get everything going as we bring you to tonight's
"market focus" well, we clearly request say that stocks are at new yearly highs but 2011 highs are pretty easy, this is the first trades day of the year. it's bigger than that, the gains today put the major indices at their highest levels since the weeks before the lehman brothers collapse in 2008. we're going to bin with our charts we roll out our new look charts here, a ten year chart of the nasdaq 100 exchange traded fund, a full decade here, folks. we should know while these chart does have a new look, all the same information is here, just maybe in a slightly different place. and we have a video tour of these charts on our web site. you can go to nbr-on-pbs.org. back to the chart. we haven't seen these kinds of levels for this nasdaq 100 chart since back really right after the dotcom burst. this was the ten year low we saw back right around after the recession of 2001 and the 9/11 attacks. clearly we've been climbing now, again, a decade high
for technology. and among the tech stocks that are behind this rally, apple. shares jumping another two% today, this green dot means hitting a new 52-week high today on this chart. breaking out to the high as it has really been in this tight range going on here for the last month or so. but apple breaking out tonight. expectations at apple may be expands its iphone to the verizon network sometime this year. verizon shares jumping 2%, again, a 12 month chart and we're seeing a new 52-week high for vars of vz. the iphone verizeon rumors have been around for a while but the market seems to be believing it. a trio of other telekom stocks focused on mobile phones, sprint adding 6% on heavier than usual volume and analysts at fbr capital thinks holiday sales were strong. prepaid wireless providers leap and metro pcs both up. separate analyst reports think they both saw some new subscriber growth to end the year. >> financial stocks overall really lead the broad market rally in helping lead the
charge today, yeah, it was bank of america again. b of a has been staging quite a rally since late november. i mean take a look at this chart now. moving up by 6% today but remember t wasn't that long ago we're talking about $11 per share. very heavy volume on this move higher in the month of december, continuing into this trading day. this is the highest price since august helped out by the news of it buying back billions of dollars of bad home loans sold to the government. b of a lead the rally for the dow jones industrial average. fellow financial giant jpmorgan second-best dow stock. it and alcoa up 2.7%. alcoa is noteworthy as it starts earning season a week from tonight. exxon hitting a new 13 month high on this 2% rally. >> a hesitant consumer continues to disappoint at clorox, the maker of household products cut its sales and earnings outlook and among the problem, bleach and cat litter. we're going to begin with a 90 session chart here as we roll out of clx, the last 09 session, clearly moving from the prices we've seen down
to the lows tonight. now off by what, 2.7%. the drop that we see here in november, though, this drop down came when it cut its fiscal 2011 forecast. now today's disappointing is the second time we've seen disappointment. this one year chart now of clorox really takes the stock to prices we haven't seen since back before that first disappointment and also down below levels we previously had seen buyers around 62 per share. finally after all the travel around the holidays, on-line travel stocks seen stronger than unusual volume. expedia, orbitz each selling off, officially now removed american airline tickets from their web site. price line.com finding buyers pushing that high-priced stock up 4% on the day. and just to remind you we do have a video on our web site explaining our new look charts at nbr on pbs.org that is tonight's market focus.
>> tom: it's postseason nor for the nfl and that means the expiration of the players union contract getting closer, tonight's beyond the scoreboard our look at the business of sports begins with one the most closely watched contract talks in some time here, between the nfl and the players union, rick horrow back with us. always nice to see you. just ready for the screen pass. >> you'll get it in a mine. >> tom: the nfl commissioner sent an e-mail this morning to 5 million nfl fans expectsing to reach a new deal with with the players contract. here is what the nfl is putting on the table. the three things it wants. it wants two more regular season games, wants to address the big salaries for rookies, bring them down
some and promise tone hans rules on dangerous hits. will it get all three? >> well, the two games make day little bit of a more challenging working environment so now they want safety to compensate for that and the rookie wage scale always popular with the fans which is yes commissioner goodell is starting the pr campaign. will they get it? well, they need to save the $8 billion business, i'm personally holding this football until the labor dispute is resolved. it might be a long time, i'm not sure if that will work. >> tom: maybe until may or beyond that. clearly it a different economic environment though as it enters this contract negotiation period than the last one. and the commissioner referred to this today in the e-mail. he said this, economic conditions have changed dramatically inside and outside the nfl since 2006 when we negotiated the last cba, collective bargaining agreement. clearly, rick, they have inside the nfl. back then in 2005 you saw nfl teams making a collective $980 million. now it is over a billion dollars each profits. this is a good business here, and clearly dot players have the most to risk? >> players have the most to
risk because their average caer radios are 3 or 4 years. the owners have a lot to risk because franchises are going for a billion dollars. do you pay the former player, the rookie wage school, what about future draft ease t is a very, very complicated issue and we will have to see how it is resolved. >> tom: fair enough, meantime move to the ice. the nhl and florida panthers trying something interesting. a good time guarantee for fans allowing them a money-back guarantee on their tickets. here is the small print. only good for home games in january, only good for four tickets and refunds for the tickets only, not parking or anything else. could this catch on. >> let's remember it's better than a loss and you have to go home with i a up cole of beers in your stocking aand having to fight parking and the traffic. the bottom line is it is a very creative attempt bit panther staff to focus away from the scoreboard itself. we know we going to be on the scoreboard here and the bottom line is everybody can't win. statistically half the teams lose all the time and you got to make sure that it's entertainment, not just
winning. >> tom: speak of entertainment, the ufc, ultimate fighting chaling eng is a huge entertainment business and getting larger, one of the longest running reality tv shows getting a new season. how big is this business exactly worth, do we know? >> billions and billions and billions of dollars. the television show is one of the fent most watched reality shows. reaching 100 million homes. and corporations are very interested in it because it's taking the country by storm. >> tom: our sponsors taking notice of this ufc as not one the big four major league sports. >> it is not the golf and tennis demographic but it is an appropriate niche and the sponsorships have gone up double, tripled ever the last couple years and growing fast. >> tom: we will leave it there here with rick horrow, our martial arts master at this point as we go beyond the sports board with wrik horrow. >> susie: here's what we're watching for tomorrow. we'll see how the nation's automakers wrapped up the year: they report december sales.
also tomorrow, what were they thinking? we'll find out as the federal reserve releases minutes from its december policy meeting. and our word on the street? "dividends". thestreet.com's david peltier joins us with the dogs of the dow's top dividend plays. retailer dollar general is going to be spending a lot of dollars to pay the 6,000 new workers it plans to hire this year. the company has ambitious plans to expand: adding 625 stores and opening in new states, including connecticut and nevada. those new employees are part of a trend for dollar general. over the last two years, it has created more than 10,000 new jobs. >> tom: it's business as usual again tonight for the world's most popular email service. microsoft's hotmail developed a glitch over the weekend that caused some users to lose all their emails. those messages have now been restored, and microsoft is trying to figure out what went wrong. comscore, the company that keeps tabs on internet traffic, says hotmail has 360 million users worldwide.
timing. he's richard dekaser, president of woodley park research. >> when the new congress convenes later this month tax reform is sure to be on the agenda and scaling back the home mortgage interest deduction is an idea that seems to be gaining traction. two bipartisan commissions recently targeted it as expensive and inefficient and asking that we write about that. it will cost the federal government a whopping 100 billion dollars in revenue this year alone. and it is far too generous to home buyers. for example, current law allows tax deductions on up to 1 million in mortgage debt even though the typical house costs less than 200,000. and defending the subsidy in the name of home ownership is laughable when it extends to home-equity loans and second homes and resort communities. but now is the wrong time for this otherwise excellent idea. the housing recovery is still feeble. and it is important that the economy is huge. homes are american's biggest asset and mortgages are the largest class of loans at banks. kicking out this admittedly indefensible prop at a
crucial time would directly contradictory policies designed to help the housing market such as the fed's efforts to drive down interest rates and recent tax credits to encourage home buying. so let me suggest a compromise. -- compromise, scale back the tax deduction but later say beginning in 2013. by grandfathering in mortgagings during the next two years we encourage home buyers to act now while generous terms are still available, thereby reducing the covery hang of unsold properties and helping the firm prices. then we could gradually phase in the tax later after the markets have had time to mend. i'm richard >> susie: and finally tonight, >> tom: that puts a cap on this first business day of the brand new year. >> things happen in threes, three rough years so now we're heading for three good years, hopefully. >> tom: we will be following it day-to-day right here on nightly business report that
is our report for monday, january 3rd. happy new year, i'm tom hudson. thanks for watching. have a great night, susie. >> susie: same to you, tom, i'm susie gharib. good night everyone. glad to see you all again and hope to see you again tomorrow night. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt